The Right ETF For Russia Right Now
Dedicated observers and traders of emerging markets equities and exchange traded funds will not be surprised by the following anecdote: The Market Vectors Russia ETF (NYSE: RSX), the oldest, largest and most heavily traded Russia listed on a U.S. exchange, is likely to finish lower on Friday, extending its losing streak to nine days.
RSX entered Friday's session nearly 14 percent below its 200-day moving average and almost 13 percent below its 50-day line. The ETF has not closed above either of those critical moving averages since June.
All of that is a roundabout way of saying the Direxion Daily Russia Bear 3x Shares (NYSE: RUSS) is, quite clearly, the superior avenue to Russian stocks via ETFs for the moment. RUSS, which attempts to deliver three times the daily inverse performance of the Market Vectors Russia Index (MVRSXTR), RSX's underlying benchmark, is up a tidy 8.1 percent at time of writing and will likely, barring an epic reversal, end Friday on a nine-day winning streak.
Russian stocks are often more volatile than broader emerging markets benchmarks. For example, RSX carries a three-year standard deviation of almost 27 percent, more than double the comparable metric for the MSCI Emerging Markets Index.
That point is relevant because the combination of usual Russian equity market volatility and the volatility inherent with triple-leveraged ETFs can work for and against traders, depending on the scenario. In the case of RUSS, volatility is working in the ETF's favor. Over the past month, RSX has declined 13.2 percent, meaning it would be logical to expect RUSS should be higher by about 40 percent. However, RUSS has surged nearly 46 percent over that span.
Still, RUSS is not wildly stepping away from its objective. The ETF's 30-day variance relative to triple the inverse returns of the Market Vectors Russia Index over that period is just 2.6 percent, according to Direxion data.
Another anecdote speaks to more near-term upside for RUSS, that being traders are leaving the ETF while allocating new money to its bullish counterpart, the Direxion Daily Russia 3X Bull Shares (NYSE: RUSL). Since the start of the current quarter, $19.6 million has departed RUSS while RUSL has seen inflows of almost $37 million, a familiar scenario among pairs of leveraged ETFs.
Again, that is just anecdotal data. Traders looking for a more efficacious gauge of how Russia ETFs are going to perform going forward should look at the United States Brent Oil Fund (NYSE: BNO). Russia prices its oil exports in Brent and the country is one of the largest non-OPEC producers in the world. BNO is off 2 percent today and is one of 185 ETFs in the new all-time low club.
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